Shell Reports $6.2 Billion Q3 Profit Amid Higher Oil Prices and Refining Margins

Shell Reports $6.2 Billion Profit in Q3

British oil giant Shell has reported a $6.2 billion profit for the third quarter, in line with estimates. The company’s strong financial performance was driven by higher oil prices and refining margins.

Earnings Expectations

Analysts expected adjusted earnings of $6.48 billion, according to an LSEG-compiled consensus.

Year-on-Year Comparison

Despite being higher than the $5.1 billion profit in the second quarter, Shell’s Q3 profit marked a decline from the $9.45 billion reported a year ago. The previous year’s profit was boosted by the Russia-Ukraine conflict, which increased oil and gas prices.

Share Buyback Announcement

Shell also announced a $3.5 billion share buyback to be carried out over the next three months. The company’s CEO, Wael Sawan, stated that the $6.5 billion allocated for the second half of the year exceeded the initial $5 billion share buyback plan announced in June.

Operational and Financial Performance

In his statement, Sawan highlighted Shell’s strong operational and financial performance in capturing opportunities in volatile commodity markets.

Despite a decrease in free cash flow from $12.1 billion in Q2 to $7.5 billion, cash capital expenditure rose from $5.1 billion to $5.6 billion.

Industry Context

Energy majors have seen record profits recently due to soaring fossil fuel prices.

Oil prices in Q3 2023 continued to rise, driven by factors such as supply cuts by Saudi Arabia and Russia. The International Energy Agency has warned of ongoing market volatility due to escalating conflicts in the Middle East.

BP, another major player in the industry, recently reported a decrease in third-quarter profit, while France’s TotalEnergies slightly outperformed expectations.

Divisional Performance

Shell’s integrated gas division demonstrated steady performance, with favorable trading. However, the company’s renewables and energy solutions division reported a $67 million loss due to weaker margins caused by seasonal effects and lower trading. Capital expenditure for this division was $659 million.

Decarbonization Program and Criticism

Shell has faced criticism regarding the pace of its decarbonization program, including from some of its shareholders. The company recently confirmed plans to cut 200 positions within its low-carbon solutions unit in 2024.

Investor Concerns

Investors have expressed concerns about Shell’s long-term plans to achieve net-zero emissions. Stuart Lamont, an investment manager at RBC Brewin Dolphin, stated that the lack of information about the company’s net-zero goals was a cause for concern.

Market Outlook

With the geopolitical environment remaining volatile, oil prices are projected to continue their recent rise, suggesting a strong final quarter for Shell.

Market Performance

As of 8:30 a.m. on Thursday, London-listed shares of Shell had risen by 1.1%.

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